9th Cir. Allows Second Mortgage Strip Off in Chapter 20 Bankruptcy

The term 'chapter 20' means a consumer who files chapter 13 bankruptcy within four years after receiving a discharge of debts in chapter 7 bankruptcy.

The Bankruptcy Code generally allows consumers to strip off second mortgage liens in chapter 13 bankruptcy, so long as their homes are worth less than they owe on their first mortgages. See 11 U.S.C. §§ 506(a) and 1322(b).

However, the Arizona bankruptcy judge in the Boukatch case denied the consumers' motion to strip lien because they recently received discharge in chapter 7 and thus were not eligible for discharge in chapter 13.

The panel reversed the Arizona bankruptcy judge and held the consumers could strip their second mortgage lien in chapter 13, regardless of discharge eligibility.

After reviewing the statutory language in Title 11, the panel reasoned that chapter 20 lien stripping should be allowed because "nothing in the Bankruptcy Code prevents it."

The Ninth Circuit's Boukatch opinion joins the "growing consensus of courts" across the country to allow chapter 20 lien stripping.

un·der·dog

noun

1. a competitor expected to lose in a fight.

2. a person with little status in society.

Free Speech Notice

"This blog contain my independently-produced public free speech about existing public consumer law controversies. I adhere to the journalistic standards I learned over the past decade as a writer and editor at various newspapers and journals. This blog was recently cited as newsworthy by The Skanner News." - Michael Fuller

Professional Notice

This website is not a solicitation for professional employment. I am licensed to practice law in the State of Oregon only and can be reached at PO Box 2316, Portland, OR 97208.

Legal Notice

The Underdog Lawyer ® is a registered trademark of Michael Fuller. Copyright 2015 Michael Fuller. Reproduction of this website is only allowed for consumer purposes. Results vary for every client in every case. Litigation results subject to appeal and compromise.